* Sweden and Norway improving, but Finland still weak * Estimates unchanged as somewhat better results offset Finland * Cold start to the year and weakened USD bode well for Q1
Q4 results
After nine quarters of organically contracting sales, Alligo finally returned to organic growth in Q4. Sweden and Norway both progressed nicely, Sweden mainly on sales and Norway on the margin; Finland, however, saw an unsatisfactory margin in the quarter, as the market in the region remains tougher than the others, although part of this underperformance was due to investments in a new production facility for the company's defence customer Patria, which is growing rapidly. The seasonally strong cash flow was even better than we expected, bringing down the group's leverage to a more palatable 2.6x lease adj. ND/EBITDA (3.0x in Q3). All-in-all, we consider the results as slightly positive.
Estimate changes
The report also stated that two larger Finnish customer relationships are set to end. The impact of this was clarified during the earnings call, when management explained that these relationships were being ended by Alligo, as they did not offer satisfactory profitability, and that they constituted around 1% of group sales. The net effect of this and the somewhat better than expected result is that we leave '26e-'27e adj. EBITA unchanged.
Outlook and valuation
The continued weak performance in Finland also brought about the appointment of a new country manager, someone whom the CEO has known for 17 years and considers very likely to be able to improve the region's performance. On the group level, we think the cold weather seen since January coupled with the weakened USD, which will incrementally benefit the gross margin, means Alligo is well positioned for continued operational momentum in Q1. On our updated estimates, the share is now trading at 14-10x '26e-'28e P/E.